2013-10-21 11:45:45 - New Country Reports research report from Business Monitor International is now available from Fast Market Research
The decision of the new centre-right government, elected in April elections, to all but abandon the country's EU membership bid is of little surprise. Given that opinion polls have long suggested citizens would vote against accession and there is a large euro-sceptic majority within parliament, we see the decision as adding to long-term political stability. Indeed, Iceland remains a member of the European Economic Area and has strong international policy anchors within this framework.
Real GDP growth will be slightly above the long-term trend, forecast at 2.6% over our 10-year forecast period. This rate of economic expansion will be among the fastest for any developed nation.
Fostering higher levels of investment will be crucial for the Icelandic government in order to bolster
real GDP growth. Residential construction already shows some signs of starting to pick up again, but additional public sector investment in infrastructure will be needed if alternatives to a banking-led long-term growth model is to be found.
Full Report Details at
- www.fastmr.com/prod/694759_iceland_business_forecast_report_q4_2 ..
Major Forecast Changes
We have revised up our Icelandic population forecasts and expect the number of people resident in the country to grow by 10% by 2022 to 360,775. This is on the back of continued natural increases in the population, as well as ongoing immigration. This will provide a boost to nominal GDP aggregates, even if per capita measures are slower to improve.
Key Risks To Outlook
Global economic conditions could deteriorate markedly, stifling Iceland's export-driven recovery.
If the government decides to remove the country's capital controls too soon it could result in a disorderly depreciation of the krona.
Report Table of Contents:
Major Forecast Changes
Key Risks To Outlook
Chapter 1: Political Outlook
BMI Political Risk Ratings
Minimal Damage From EU Snub, But A Renewed Focus On China Relations
- The Icelandic government is maintaining a hard line with the EU over fishing quotas and membership talks, with the country's accession bid now all but abandoned. We see a return to accession talks as highly unlikely under the current administration, which is boosting economic relations with China in the hope of attracting badly needed investment. The breakdown of EU talks would have a minimal impact on the domestic economy given existing regional trade agreements, though the threat of fishing sanctions and ongoing economic uncertainty are key challenges for the government.
Long-Term Political Outlook
Few Major Threats On the Horizon
- Over our 10-year forecast period, we see Iceland enjoying a high degree of political stability given a very solid security environment, few societal dividing lines and a high standard of living. The Progressive-Independence Party coalition's decision not to pursue EU membership may actually reduce political uncertainty rather than increase it.
TABLE: POLITICAL OVERVIEW
Chapter 2: Economic Outlook
BMI Economic Risk Ratings
Three Key Policy Challenges For Economic Stability
- We maintain our forecasts for a gradual acceleration of growth in Iceland in the coming two years, though note that a weak banking sector and legacy issues from the crisis continue to weigh on the medium-term outlook. Key policy challenges include resolving the fishing dispute with the EU, implementing promised write-downs to household debt, and gradually lifting capital controls. Against this backdrop, it will take until 2021 for pre-crisis level of GDP per capita in US dollar terms to be reached.
TABLE: ECONOMIC ACTIVITY
Key Sector Outlook
Tourism Boom To Continue, But Investment Still A Drag
- One of the key pillars of Iceland's post-crisis economy, the tourism sector continues to post stellar growth rates, providing a valuable source of inflows, tax revenues and jobs. The short-term outlook for tourism remains positive, and we forecast 20.8 % growth in arrival numbers this year. However, longer-term capacity constraints and base effects are likely to lead to more moderate growth in subsequent years.
Chapter 3: 10-Year Forecast
The Icelandic Economy To 2022
Slow But Steady Growth
- Despite Iceland's ongoing economic difficulties, the country remains one of the wealthiest nations in the world, with a solid economic base. Growth will be only slightly above trend over the forecast period, but we believe the fiscal, debt and balance of payments problems facing Iceland can be tackled over the next decade.
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Chapter 4: BMI Global Assumptions
Lowering EM Growth Forecasts
TABLE: GLOBAL ASSUMPTIONS
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %
TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %
About Business Monitor International
Business Monitor International (BMI) offers a comprehensive range of products and services designed to help senior executives, analysts and researchers assess and better manage operating risks, and exploit business opportunities, across 175 markets. BMI offers three main areas of expertise: Country Risk BMI's country risk and macroeconomic forecast portfolio includes weekly financial market reports, monthly regional Monitors, and in-depth quarterly Business Forecast Reports. Industry Analysis BMI covers a total of 17 industry verticals through a portfolio of services, including in-depth quarterly Country Forecast Reports. View more research from Business Monitor International at www.fastmr.com/catalog/publishers.aspx?pubid=1010
About Fast Market Research
Fast Market Research is an online aggregator and distributor of market research and business information. We represent the world's top research publishers and analysts and provide quick and easy access to the best competitive intelligence available.
For more information about these or related research reports, please visit our website at www.fastmr.com
or call us at 1.800.844.8156.